Colombian Finance Minister Juan Carlos Echeverry said on Wednesday the South American country’s deficits should shrink in 2012, with growth expected to stay strong at 5% in the region’s fifth largest economy.
Latin America’s No. 4 oil producer has seen a strong recovery from the global economic crisis, recouping two investment-grade credit ratings so far this year and continuing to reap strong inflows in the mining and oil sectors.
Presenting the government’s latest fiscal plans, Echeverry said that the economy should grow at 5% this year and next, with inflation at 3%. The central bank has an inflation target of 2 to 4%.
Growth in the first quarter of 2011 was likely between 5% and 5.5%, the minister told reporters.
Colombia has pushed through a range of economic reforms in the last weeks including a constitutional reform to require the state to be fiscally sound, a reform to save surplus oil and mining money and a bill to more evenly spread that wealth.
“This is a serious fiscal plan, austere, supported by reforms passed by Congress,” Echeverry said.
Bogota sees lower deficits in 2012. The minister gave two figures: one that included the costs of heavy rains, which have caused billions of dollars in damages, and one that did not.
The central government fiscal deficit target would fall to 3.2% of gross domestic product for 2012 from 3.6% in 2011, while including the costs of rains, that deficit would be 3.5% in 2012 versus 4% in 2011, he said.
The consolidated fiscal deficit — which includes the public sector, national and regional governments, state-owned companies and others — should ease to 2.2% of GDP next year from 3.4% this year with the costs of rains.
That would be 1.9% in 2012 versus 3% in 2011 without the emergency costs.
The Andean nation plans to issue 27.5 trillion pesos ($15.5 billion) in peso-denominated Treasury bonds, known as TES, in 2012, slightly lower than the 28 trillion pesos planned for this year, according to Echeverry.
Of that figure, TES bonds offered at auction would rise to 20 trillion pesos next year from 18 trillion this year.
The peso-denominated Colombian Treasuries are the second largest source of revenue for the government after taxes.
Two Wall Street ratings agencies, Standard & Poor’s and Moody’s, upgraded the country’s credit rating this year to investment grade, clearing the way for a range of investment funds to bring money into the country’s securities.
That coupled with strong inflows in the energy and mining sectors may put more pressure on the peso currency, which has firmed 7.85% in the last 12 months.
The government planned to issue $3 billion in foreign bonds next year, up from $2.24 billion this year, while credits from multilateral lenders would fall slightly, to $1.36 billion from $1.5 billion in 2011, according to the fiscal plan.
“We’ll be careful to not bring in dollars to the economy to avoid an effect on the exchange rate,” Echeverry said.
